COMMUNITY FOUNDATION OF THE SOUTH OKANAGAN …Insurance 955-955 986 Licenses, dues and fees 14,058-14,058 12,827 ... Travel 4,489-4,489 14,301 323,357 30,635 353,992 374,304 Rental

Financial Statement of

COMMUNITY FOUNDATION OF THE

SOUTH OKANAGAN SIMILKAMEEN

Year ended December 31, 2018

KPMG LLP

200-3200 Richter Street

Kelowna BC V1W5K9

Canada

Tel 250-979-7150

Fax 250-763-0044

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of Community Foundation of the South Okanagan Similkameen

OpinionWe have audited the financial statements of Community Foundation of the SouthOkanagan Similkameen (the Entity), which comprise:

• the statement of financial position as at December 31, 2018

• the statement of revenue, expenses and fund balances for the year then ended

• the statement of cash flows for the year then ended

• and notes to the financial statements, including a summary of significantaccounting policies

(Hereinafter referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all materialrespects, the financial position of the Entity as at December 31, 2018 and its results ofoperations and its cash flows for the year then ended in accordance with Canadianaccounting standards for not-for-profit organizations.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditingstandards. Our responsibilities under those standards are further described in the"Auditors' Responsibilities for the Audit of the Financial Statements" section of ourauditors' report.

We are independent of the Entity in accordance with the ethical requirements that arerelevant to our audit of the financial statements in Canada and we have fulfilled our other

ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.

Responsibilities of Management and Those Charged WithGovernance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financialstatements in accordance with Canadian accounting standards for not-for-profitorganizations, and for such internal control as management determines is necessary toenable the preparation of financial statements that are free from material misstatement,whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing theEntity's ability to continue as a going concern, disclosing, as applicable, matters relatedto going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Entity or to cease operations, or has no realistic alternativebut to do so.

Those charged with Governance are responsible for overseeing the Entity's financialreporting process.

Auditors' Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement, whether due to fraud orerror, and to issue an auditors' report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an auditconducted in accordance with Canadian generally accepted auditing standards willalways detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually orin the aggregate, they could reasonably be expected to influence the economic decisionsof users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards,we exercise professional judgment and maintain professional skepticism throughout theaudit.

We also:

• Identify and assess the risks of material misstatement of the financial statements,whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to providea basis for our opinion.

• The risk of not detecting a material misstatement resulting from fraud is higherthan for one resulting from error, as fraud may involve collusion, forgery,intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the Entity's internalcontrol.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made bymanagement.

• Conclude on the appropriateness of management's use of the going concernbasis of accounting and, based on the audit evidence obtained, whether amaterial uncertainty exists related to events or conditions that may castsignificant doubt on the Entity's ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention inour auditors' report to the related disclosures in the financial statements or, ifsuch disclosures are inadequate, to modify our opinion. Our conclusions arebased on the audit evidence obtained up to the date of our auditors' report.However, future events or conditions may cause the Entity to cease to continueas a going concern.

• Evaluate the overall presentation, structure and content of the financialstatements, including the disclosures, and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation

• Communicate with those charged with governance regarding, among othermatters, the planned scope and timing of the audit and significant audit findings,including any significant deficiencies in internal control that we identify duringour audit.

Report on Other Legal and Regulatory RequirementsAs required by the Societies Act (British Columbia), we report that, in our opinion, theaccounting policies applied by the Entity in preparing and presenting the financialstatements in accordance with Canadian accounting standards for not-for-profitorganizations have been applied on a basis consistent with that of the preceding period.

K&&^Chartered Professional Accountants

Kelowna, Canada

May 28, 2019

COMMUNITY FOUNDATION OF THE SOUTH

OKANAGAN SIMILKAMEENStatement of Financial Position

December 31, 2018, with comparative information for 2017

Assets

Current assets:

Cash and cash equivalentsRestricted cash and cash equivalentsAccounts receivable

Deposits and prepaid expenses

Investments, measured at fair value (note 2)Tangible capital assets (note 3)

Liabilities and Fund Balances

Liabilities

Current liabilities:

Accounts payable and accrued liabilitiesSecurity depositsDemand loan (note 4)

Fund balances

Unrestricted

Invested in tangible capital assetsUnrestricted

Restricted:

Endowments

Retained returns from investments

Other

See accompanying notes to financial statements.

Approved on behalf of the^Board:

VDirector

2018 2017

211.085 $

441,023

31,865

13,834

I 111,073

599,977

2,436

306,222

697,807

8.934,052

2.953.912

1,019,708

9,565,246

1,347

$ 12,585,771 $ 10,586,301

35,416

10,412

1,872,0151,917,843

1,081,897

210,956

1,292,853

8,164,154772,359

438,562

21,493

21,493

1,347

105,946

107.293

8,010,062

1,496,603

950,8509,375,075 10,457,515

10,667,928 10,564,808

$ 12,585,771 $ 10,586,301


OKANAGAN SIMILKAMEENStatement of Revenue, Expenses and Fund Balances

Year ended December 31, 2018, with comparative information for 2017

Unrestricted Restricted 2018 2017

Revenue

Investment

Investment income $ 21,045 $ 428,026 $ 449,071 $ 583,603Gain (loss) on investments (note 2) - (512,630) (512,630) 97,248Less: Investment management fees - (49,082) (49,082) (55,736)

21,045 (133,686) (112,641) 625,115

Contributions

Designated funds - 135,727 135,727 179,180Flow through - 621,498 621,498 455,378Grants and sponsorships 120,186 29,168 149,354 106,069

Other 188,568 - 188,568 36,685

308,754 786,393 1,095,147 777,312

Administration fees

Charged on restricted funds 144,435 (144,435) - -

Other 5,708 - 5,708 5,620

150,143 (144,435) 5,708 5,620

Rental revenue (note 5) 226,317 - 226,317 -

Fundraising 77,065 - 77,065 72,605

Total revenue 783,324 508,272 1,291,596 1,480,652

Expenses

Grants paid - 598,889 598,889 503,890

Administrative

Amortization 783 - 783 642

Contract fees 300 20,829 21,129 29,902

Insurance 955 - 955 986

Licenses, dues and fees 14,058 - 14,058 12,827

Office and miscellaneous 16,522 2,973 19,495 19,301

Professional development 10,981 - 10,981 7,359

Professional fees 17,744 - 17,744 34,350

Public relations and communications 9,930 6,833 16,763 32,194

Rent 10,800 - 10,800 10,800

Salaries and wages (note 8) 232,638 - 232,638 207,361

Telephone 4,157 - 4,157 4,281

Travel 4,489 - 4,489 14,301

323,357 30,635 353,992 374,304

Rental expenses (note 5) 221,032 221,032 -

Fundraising 14,563 - 14,563 43,177

Reclassification of endowment funds - - - 100,000

Total expenses 558,952 629,524 1,188,476 1,021,371

Excess (deficiency) of revenue over expenses 224,372 (121,252) 103,120 459,281

Fund balances, beginning of year 107,293 10,457,515 10,564,808 10,105,527

Fund transfers 961,188 (961,188) - -

Fund balances, end of year $ 1,292,853 $ 9,375,075 $ 10,667,928 $ 10,564,808



OKANAGAN SIMILKAMEENStatement of Cash Flows

Year ended December 31, 2018, with comparative information for 2017

Cash provided by (used in):

Operating activitiesCash receipts from fundraisingCash receipts from contributionsCash receipts from endowment contributionsCash receipts from investment revenueCash receipts from rental revenueCash paid for rental expensesCash paid for administrative, fundraising and other expensesCash paid for grantsCash paid for interest on demand loan

Financing activities:Proceeds from demand loan

Repayment of demand loanDecrease in restricted cash and cash equivalents

2018 2017

77,065 $ 72,605

1,211,579 287,267

135,727 179,180

387,079 630,735

236,729 -

(122,938) -

(343,049) (502,069)(598,889) (503,890)

(71,815) -

911,488 163,828

1,900,000 _

(27,985) -

158,954 178,723

2,030,969 178,723

Investing activities:Purchase of tangible capital assetsProceeds from disposal of investmentsPurchase of investments

(2,979,627)693,833

(556,651)

534,443

(871,128)

(2,842,445) (336,685)

Increase in cash and cash equivalents

Cash and cash equivalents, beginning of year

100,012

111,073

5,866

105,207

Cash and cash equivalents, end of year $ 211,085 $ 111,073



OKANAGAN SIMILKAMEENNotes to Financial Statement


Community Foundation of the South Okanagan Similkameen (the "Foundation") is dedicated tobuilding healthy, vibrant, and livable communities across the South Okanagan Similkameen. TheFoundation makes beneficial and lasting improvements by connecting gifts of energy, ideas, timeand money with the needs and opportunities of our communities.

The Foundation sees itself operating three "lines of business". As "brokers" we achieve our goalsthrough supporting others to achieve their legacies, primarily by working with donors to fulfill theirgiving goals. As "catalysts" we act and engage in social change, working as philanthropic leaders tobuild a culture of giving, and proactively conducting research to better understand community needs.As "facilitators" we encourage others to join as groups to create their dreams by bringing diversegroups together to implement or fund social change.

The Foundation accepts donations received as contributions to its operations, endowment funds,and restricted funds, as directed by donors. Grants are made to charitable organizations throughoutthe South Okanagan Similkameen using income earned from the investment of donated assets.

The Foundation was incorporated on December 18, 1991, and became a registered charity underthe Income Tax Act on August 10, 1992. The Foundation operates under the Societies Act of BritishColumbia. As a result of its status as a charity, the Foundation is exempt from income taxes and mayissue tax receipts to donors as long as it complies with the rules and regulations of the Income TaxAct.

1. Significant accounting policies:

The financial statements are prepared in accordance with Canadian accounting standards fornot-for-profit organizations. The Foundation's significant accounting policies are as follows:

(a) Fund accounting:

The Foundation follows the restricted fund method of accounting for contributions, therebyrecognizing contributions and investment income as revenue in the appropriate restrictedfunds as specified by donors. The fund classifications are:

(i) Unrestricted:

Unrestricted represents unrestricted contributions, unrestricted investment income,unrestricted fundraising proceeds, administrative fees charged to restricted funds,administrative expenses and community grants. The Foundation holds itsinvestment in tangible capital assets and realizes related net revenue inside itsunrestricted fund.


OKANAGAN SIMILKAMEENNotes to Financial Statement (continued)


1. Significant accounting policies (continued):

(a) Fund accounting (continued):

(ii) Restricted

Restricted funds include endowment funds and other externally or internallyrestricted funds. Endowment fund represents funds that are permanently restrictedeither by the donor or internally by the. Foundation; these funds must be maintainedin perpetuity. Other restricted funds represent flow-through funds specificallydesignated by donors, grants designated for specific and non-specific charitablepurposes as well as restricted investment income earned on the endowment funds.Administration fees are charged on all restricted funds in accordance with financialmanagement policies of the Foundation.

(b) Cash and cash equivalents:

Cash and cash equivalents includes cash and term deposits readily convertible into cash.

(c) Tangible capital assets:

Tangible capital assets are recorded at cost, less accumulated amortization. When theFoundation's management determines that certain tangible capital assets no longercontribute to its ability to provide services, their carrying amount is written down to its netrecoverable amount. Tangible capital assets are amortized using the following methodsand annual rates:

Asset Method Rate

Building Straight-line 50 yearsFurniture and equipment Declining balance 20%Computer equipment Declining balance 20-55%

(d) Investments:

Investments include pooled investment funds, and interest bearing investments. Theseinvestments are recorded at their fair values determined, on a settlement date basis, on

the last business day of the fiscal period.




1. Significant accounting policies (continued):

(e) Revenue recognition:

Contributions to the restricted or unrestricted fund are recognized as revenue when theyare received or receivable, provided the amounts are measurable and collection isreasonably assured.

Investment income earned on restricted funds is recognized as revenue in the restrictedfund in accordance with the terms of the restricted contribution. Investment income on

unrestricted funds is recognized as revenue in the unrestricted fund.

Rental revenue is recognized in the unrestricted fund as revenue is received or receivable,provided the amounts are measurable and collection is reasonably assured.

(f) Contributed services:

The Foundation receives services from volunteers each year and due to the difficulty ofdetermining their value, contributed services of volunteers are not recognized in thefinancial statements. When the value of donated services can be reasonably estimated,the amount has been recorded at market value.

(g) Financial instruments:

The Foundation measures cash and investments at fair value and accounts payable andaccrued liabilities at amortized cost. Changes in fair value of cash and investments arerecognized in the statement of operations in the periods in which they arise.

(h) Use of estimates:

The preparation of financial statements requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenditures during the reporting period. Actual results coulddiffer from those estimates.




2. Investments:

Fair Value

Cost 2018

Fair Value

2017

Pooled investments $ 8,418,855 $ 8,934,052$ 9,565,246

Gains (losses) on investments for the year consisted of the following:

2018 2017

Realized gains $ 62,379 $Unrealized gains (losses) (575,009)

90,668

6,580

$ (512,630) $ 97,248

3. Tangible capital assets:

2018 2017

Accumulated Net book

Cost amortization value

Net book

value

Land $ 349,279 $ - $ 349,279 $ -

Building 2,627,850 26,279 2,601,571 -

Furniture and equipment 3,336 1,719 1,617 1,033Computer equipment 10,989 9,544 1,445 314

$ 2,991,454 $ 37,542 $ 2,953,912 $ 1,347




Demand loan:

2018 2017

Demand loan bearing interest at the the lender's primerate plus 0.75%, secured by land and building andassignment of rents at 501 Main Street. Repayable inblended monthly payments of $9,980 $ 1,872,015 $

Assuming the demand feature is not exercised, scheduled principal payments required for thenext five years are as follows:

2019 $ 33,3302020 34,915

2021 36,575

2022 38,314

2023 40,136




5. Rental revenue and expense:

Rental revenue and expenses for the year ended December 31, 2018 were as follows:

Revenue $ 226,317

Administration 62,086Amortization 26,279Interest 71,815Repairs and maintenance 41,983Utilities 18,869

(221,032)

Surplus $ 5,285

Funds held in trust:

At December 31, 2018, the Foundation held trust funds totaling $978,036 (2017 - $1,045,906)on behalf of other charitable organizations. These funds are neither an asset or a liability of theFoundation and, accordingly, are not reflected in the accompanying financial statements.

Financial risks and concentration of risk:

The Foundation invests its funds according to an investment policy approved by the Board. TheFoundation manages credit, liquidity and market risk associated with its financial instruments byinvesting in a diversified portfolio managed by an investment firm approved by the Board ofDirectors. The Foundation's investment policy outlines the objectives, policies and processesrelating to investment activities and applies to all investments of the Foundation.

The Board of Directors has overall responsibility for the establishment and oversight of theFoundation's risk management framework, including risks related to financial management ofassets.




7. Financial risks and concentration of risk: (continued):

The Foundation has exposure to the following risks from its use of financial instruments:

(a) Credit risk:

Credit risk is the risk that a counterparty to a financial instrument fails to meet itscontractual obligations. Such risks arise principallyfrom certain financial assets held by theFoundation. The maximum credit risk exposure for the Foundation's financial assets is thecarrying value of the assets.

(b) Liquidity risk:

Liquidity risk is the risk that the Foundation will not be able to meet its financial obligationsas they fall due. The majority of the Foundation's assets are investments traded in activemarkets that can be readily liquidated. In addition, the Foundation aims to retain asufficient cash position to manage liquidity in order to meet its obligations on a timelybasis. Liquidity risk for the year ended December 31, 2018 was impacted by the issuanceof demand loan financing on the purchase of real estate.

(c) Market risk:

Market risk is the risk that changes in market prices, as a result of changes in interest ratesand equity prices, will affect the Foundation's income or the value of its holdings offinancial instruments. The objective of market risk management is to manage and controlmarket risk exposures within acceptable parameters, while attempting to maximize thepotential return.

(i) Interest rate risk:

Interest rate risk relates to the risk that changes in interest rates will affect the fairvalue or future cash flows of financial instruments held by the Foundation. TheFoundation is invested in several fixed income pooled investment funds and attemptsto manage this risk by maintaining a mix of investments across a variety of assetclasses. The Foundation's demand loan bears interest at a floating rate as disclosedin note 4.

(ii) Equity price risk:

Equity price risk is the risk that the fair value of equity financial instruments willfluctuate due to changes in market prices. The Foundation is exposed to equity pricerisk on its indirect investments in preferred and common stock. The objective of theFoundation's investment policy is to manage equity price risk by maintaining aportfolio which is diversified across geographic and industry sectors.

10




7. Financial risks and concentration of risk: (continued):

(iii) Valuation risk:

The Foundation is subject to valuation risk through its indirect investment inalternative assets including infrastructure and real estate. These assets are regularlyreviewed and valuations are updated accordingly.

8. Remuneration paid to directors, employees and contractors:

In accordance with the Societies Act (British Columbia) Section 36.1 and Societies Regulation9.2(b):

The Directors of the Foundation receive no remuneration for the performance of theirresponsibilities as Directors.

For the fiscal year ending 2018, the Foundation paid total remuneration of $90,000, to oneemployee for services of whom received total annual remuneration of $75,000 or greater.

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Documents

COMMUNITY FOUNDATION OF THE SOUTH OKANAGAN …Insurance 955-955 986 Licenses, dues and fees 14,058-14,058 12,827 ... Travel 4,489-4,489 14,301 323,357 30,635 353,992 374,304 Rental